My Opinion on Manufacturing Coming Home

Manufacturing in the US is making a comeback. It has to be true -- it said so in my local newspaper. Actually, a similar story has been reported in lots of places, including a recent study released by the McKinsey Global Institute. That study is titled, “The next era of global growth and innovation.”

Propelling this comeback is an increased need to reduce the duration between the time that a product is designed and the time that it appears on the shelves. While much of the design has always occurred in the US, there was generally a lag before the product hit manufacture, which often occurred in a faraway place like China or India.

While we like to think we live and work in an ever-shrinking world (and we do), there’s still some amount of time to transfer information. And depending on the size of the run, it may or may not make fiscal sense, especially as manufacturing in the US is gaining momentum.

Part of this shift to the US has to do with the fact that labor costs in places like China are on the rise. There are also uncertain and potentially rising tariffs, fluctuating currency exchange rates, and fuel costs that have turned sharply upward in the past 24 months. Mix all those facts together, and when you ask why manufacturing is making a comeback domestically, the question becomes, “Why not?”

Wal-Mart recently announced that it would be buying an additional $50 billion worth of US-made products over the next decade. That sounds like a pretty good indicator to me. The company plans to increase orders for items like paper and sporting goods, which it already buys domestically, and bring back production of some textiles, furniture, and higher-end appliances. The latter item surprises me the most, as the US seems to have lost the appliance battle, but time will tell.

A defining statement in the McKinsey report sums it up: “As long as companies and countries understand the evolving nature of manufacturing and act on the powerful trends shaping the global competitive environment, they can thrive in this promising future.”

It’s generally acknowledged that manufacturing tends to rise as an economy grows, with emphasized growth coming out of the recession like the one of a few years back. Sustaining that growth, and by how much, is dependent on a bunch of factors. They include the availability of low-cost and/or highly skilled labor; having and/or building the proper infrastructure, meaning efficient transportation of resources/materials and of goods produced; and access to the technology that’s required to manufacture goods in this new world. There’s also a difference between manufacturing complex products as opposed to more simple goods.

A nice benefit of the increase in manufacturing is the service industries that get pulled along in tow. Depending on your definition, this could include the research and development activities, sales and marketing jobs, and certainly customer support.

The final piece of this puzzle lies with investment. Will the proper level of investment be made to fully secure the manufacturing growth in the US? If the promises made by both parties in the recent election hold true, the investment will be there. Where it comes from specifically is still to be determined, but it likely (hopefully?) will materialize.

It always matters, Cabe. It's just how willing are we to recognize that human rights apply to all people in all places and to do something about it regardless of the hit to our pocketbooks. But then, Jesus was betrayed for thirty pieces of silver so what can we expect when millions are at stake - it seems the thirst for money will always be the downfall of man.

Interesting article, Ann. I found the quote regarding Chinese manufacturing "Of course some companies will consider moving their manufacturing overseas, but it's easier said than done when the supply chain is here" highly ironic...what a shift from the past - and Mexico?!

How tragic about the suicides that have been occurring. But is it really Foxconn's desire to move asssembly line workers into R&D and other innovative positions which is what the article mentions is their goal with the advent of robots? Not every worker aspires to get off the line and what any employee wants is a safe work place and a fair wage. Another question also comes to mind - will there even enough positions for the soon to be displaced workers?

Bringing work back home may never happen. The USA fought hard for human/worker rights. People died over it. Now, those same corporations who fought against those rights, ship jobs off to places were abuse is fine. At home, consumers expect a low price of good, that only labor abuse can bring.

Foxconn, or whoever, can unionize, they will just find another place where the work is cheap. Other parts of Asia, then India, back to Mexico. When everyone fights back, they will industrialize places like the Congo.

I agree Ann, especially when it comes to exchanges. While buying online is often tempting, the product often arrives damaged or is subpar for some other reason - then you have the additional hassle and expense of shipping returns. However, some items are just hard to find locally and in that event, it is a blessing to have the online option...

Nancy, I'm more likely to research online and then buy locally, when possible, for the reasons you mention. Paying a bit more is not a problem in my mind. And it's not always more, anyhow, when you include the cost of shipping for online purchases. Then there's customer service. If I can get it locally, that's usually a better option, in my experience.

I hate to be a pessimist, Charles - but it looks like it is a move to satisfy those looking in, without real substance. I hope I'm wrong...some of the conditions I have heard from colleagues visiting factories there are terrible.

It also mentioned that Foxconn said it plans to manufacture some Macs here in the U.S. - That would be interesting to follow and see if it really comes to fruition - that indeed would be manufacturing coming home.

Along with Cabe's comment, I try to keep sourcing in the US. Recently I ordered some blank boards from a company in Wisconsin, but the parts arrived via China Post. The Wisconsin address is just a front-end for web ordering at a Chinese board house.

I wonder how much of that difference might be due not only to lower labor costs (which we, of course have continued to subsidize by sending our business there) but also to a different business model. I'm hypothesizing like crazy here, but I wonder if US machine shops and material suppliers that are used to supplying large companies simply aren't set up for pick and place and shipping, etc. in small quantities to individuals such as yourself. And if companies in China are, for several reasons I can imagine along the way from manufacturing to shipping.

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